The Examined Lifehttp://www.ravikiran.com/blog
Where I torture reality till it confesses the truthTue, 08 Jul 2014 05:35:25 +0000en-UShourly1http://wordpress.org/?v=3.9.3The Women’s Reservation Bill is a Bad Ideahttp://www.ravikiran.com/blog/classic/201407/the-womens-reservation-bill-is-a-bad-idea/
http://www.ravikiran.com/blog/classic/201407/the-womens-reservation-bill-is-a-bad-idea/#commentsTue, 08 Jul 2014 05:26:35 +0000http://www.ravikiran.com/blog/?p=3611A bill to reserve 33% of seats in legislatures for women would be a bad idea at any time; it is a terrible idea when a popular leader like Modi, with tendencies towards authoritarianism, is Prime Minister.

A characteristic of the Parliamentary System is that it tends to weaken the power of parliaments over time. This is particularly true when the nation is led by a strong and charismatic leader who can run a presidential-style campaign. In the General Election, voters want to elect this leader as Prime Minister, but his name is not on the ballot. Instead, they have to vote for the leader’s candidates in their constituencies. This means that the candidates owe their careers to this charismatic leader, and they don’t have to be very capable leaders themselves.

What I have outlined above may be called the Lamp Post Theory of Parliamentary Democracies, after the popular saying that Nehru was so popular that even a lamp post standing for the Congress had a good chance of election to the Lok Sabha.

Now, India is such a large, heterogeneous and unpredictable country that lamp post phenomena have not lasted for long. Yes Nehru was very popular, but towards the end of his career he was faced with strong grassroots state leaders who were electing chief ministers he was not fully comfortable with. Indira Gandhi managed to gain dominance over her party and the country. This, she managed by stamping out local leadership from the INC. Eventually, she too lost popularity, and her party is paying the price for not cultivating strong local leadership.

After the recent General Election, much analysis has been wasted on whether there was a Modi wave. I believe that the answer is obvious. Modi was very popular, probably the most popular leader India has seen in the past three decades. But he could not have won the elections without skillful alliance-building. He was able to negotiate alliances with other parties like the TDP from a position of strength. His popularity attracted other popular local leaders, both within and outside the BJP, and they worked with him rather than at cross purposes.

So yes, although Modi is a strong leader and has been handed what is a decisive mandate by the standards of the past 30 years, he has not acquired the kind of dominance Gandhi did. The BJP still has a mind of its own, the RSS is a very autonomous body and local leaders are still important to win elections.

If I were Modi, how would I move to acquire that kind of dominance? Modi has already moved to gain control over the BJP. He has forced some leaders into retirement, he has denied tickets to potential thorns on his side. But he has had to make compromises. He couldn’t sideline Sushma Swaraj, for example.

That is where a Women’s Reservation Act will come in handy. The Act will reserve 33% of seats in all legislatures for women, and these seats will change every election.

If you are a popular local male leader, there is a 50% chance that your seat will get reserved for women in the next election. You are at the mercy of your party’s leadership to provide you with a seat elsewhere, a constituency where you may not be as popular. Right now, your popularity provides insurance against that happening. If the party leadership denies you a ticket, they risk losing that seat, either because you can stand as an independent and win, or because the opposing party can put up a strong candidate. But now, because the seat is reserved for women, the party leadership can be assured that all candidates will be newbies. As a result, the importance of the local leaders will reduce and the charisma of a strong leader will be what wins elections.

What about women leaders? Their lot will be worse, for two reasons. First, they will be shunted from constituency to constituency and will not be given time to build a local base. They will be perpetual newbies. This means that they will be even more dependent on the national leadership to win elections. Second, because they will end up always fighting other newbies, they will be unable to build up a profile – for example the fight Smriti Irani put up against Rahul Gandhi, which raised her profile significantly, will be a thing of the past.

All MPs will be at the mercy of the party leadership. And when the party leadership is controlled by a popular and charismatic leader like Modi, you can imagine the consequences.

For these reasons, the Women’s Reservation Bill is a bad idea. The Anti-Defection Act, passed 30 years ago, grievously injured parliamentary democracy in the country. This will kill it off completely. We will end up with presidential democracy without a legislature to check the powers of the chief executive. I am in favour of the presidential system, but this is not the way to achieve it.

]]>http://www.ravikiran.com/blog/classic/201407/the-womens-reservation-bill-is-a-bad-idea/feed/0Regulating my son’s Subway Surfinghttp://www.ravikiran.com/blog/classic/201406/regulating-my-sons-subway-surfing/
http://www.ravikiran.com/blog/classic/201406/regulating-my-sons-subway-surfing/#commentsTue, 24 Jun 2014 05:42:06 +0000http://www.ravikiran.com/blog/?p=3606My son loves playing Subway Surfers, and he is very good at it. I have been trying to put some sensible limits on his playing, and I have realized that I am faced with the same set of considerations I’d face if I were a regulator responsible for reining in an industry.

First, I need to know the game to be able to set my limits, if for no other reason than that I wouldn’t get my son’s respect if I didn’t. When I told him that he could play “five games a day”, he immediately corrected me to tell me that I should say “five times” because in his mind, “five games” meant five distinct games, not playing the same game five times.

Now, to know the game, I need to be at least mildly interested in the game, which means that I must have played it. But now, my limit setting is influenced, sometimes by my desire to take the tab away from him and play it myself, and other times by my thrill at seeing him play so well and wanting him to play more. An uninterested observer like my wife would be disinterested enough to be unswayed by these considerations, but she wouldn’t know enough to set good limits. This is exactly the kind of dilemma that one faces when one regulates industries.

I had started with the limit of five games a day. But soon I found that I needed to be dynamic and flexible. Sometimes, he’ll make an uncharacteristic error and get out of that turn early. To assuage his disappointment, I tell him that that turn wouldn’t count towards his limit of five games. Recently, school has started and he is unable to play on weekdays, so I increased his weekend limit to ten games. Sometimes I just let him play a few more games when he has to collect a certain targeted number of coins to make a purchase or something.

Such dynamic and frequent changes violate the principle that governance should provide consistency. If my son were a devious character, he would have learnt that the limits I set can be violated by protesting loudly. He isn’t, and that makes it easier for me to set sensible limits. Plus, he trusts me to do the right thing. In regulatory systems where the regulator isn’t clean and fair minded, providing the regulator with flexibility to set limits is a recipe for disaster.

Now, it so happens that I have only one son old enough to play Subway Surfer. If I had more than one son to regulate, my regulations would face issues of fairness very soon. If I had were regulating a whole bunch of Subway surfing children, my regulations would also face the problem of scale. I wouldn’t possibly have been able to tailor regulations for each kid. I would have to set one limit and be done with it.

Finally, there is the question of monitoring compliance. How closely should I monitor? Should I depend on my son’s self-reported count of how many times he has played or should I sit next to him and monitor? Like all good kids, my son lies and cheats on occasion, and sometimes he loses count of how many times he has played. Sitting next to him may suck up time and increases the risk of regulatory capture (I am tempted to play myself). I have learnt that letting him comply by himself by imposing a penalty for non-compliance works for him. It may not work for a different type of kd, with a different equation between the regulator and the regulated.

]]>http://www.ravikiran.com/blog/classic/201406/regulating-my-sons-subway-surfing/feed/0WWWIG-1 Envious and Righteous Angerhttp://www.ravikiran.com/blog/examined/201210/wwwig-1-envious-and-righteous-anger/
http://www.ravikiran.com/blog/examined/201210/wwwig-1-envious-and-righteous-anger/#commentsTue, 23 Oct 2012 06:06:43 +0000http://www.ravikiran.com/blog/?p=3581It has been famously observed that getting Americans to fight a class war is an extremely difficult, bordering on the impossible. This has been ascribed to the fact that almost all Americans, regardless of their material circumstances, place themselves among the middle-class. While this is no doubt true, I believe that a more precise explanation can be found in the difference between two feelings that I label envious anger and righteous anger respectively, and what Americans feel the two varieties of anger over.

An American, when he encounters a rich person, does feel anger, but this anger is tinged with envy – that is, he wishes that he, instead of the other guy, was rich. A businessman who has been bested at the game by his competitor does feel anger, but a large part of this anger is directed inwards – he gets angry at himself for not playing the game well. The anger that you feel when you lose a fair game is different from the anger you feel when you believe that the other guy has broken the rules, or when you believe that the rules have been rigged in favour of the opponent. That is the point at which you feel righteous anger, and when you do, you do not wish to replace the object of your anger. You consider the other person to be a lesser human being because he is violating fundamental norms.

Now, two caveats must be put in place here. First, human beings are complex beings. It is not always possible to clearly distinguish the two forms of anger. A person who has lost a fair fight may try to whip up righteous anger by alleging wrongdoing. Second, the two forms of anger are as much social and cultural phenomena as they are human emotions. The two kinds of anger exist in every human being and in every society, but just what we feel angry over is socially and culturally determined.

And this brings us to India. Let’s start with a commonplace observation about Indians – that we are loath to stand in queues. In queue-loving western societies, people stand in queues even when there is no obvious queue to stand in and even when there is no one to enforce the norm that one must wait one’s turn. When these norms are violated, people react with righteous anger.

In India, queues rarely happen unless there is external enforcement, and even then people continually find ways to get to the head of the queue. Others in the queue may object to those who cut to the front of the line, but these objections are laced with envious anger rather than righteous anger. They are reacting to the queue-cutting in the same way that a businessman reacts to a competitor’s moves. It is important to show some anger, because if they don’t, their objections won’t be effective, but there is also no point getting into a righteous rage about it, because in slightly different circumstances, they would have done the same thing.

As must be obvious, queue-cutting is only a particular instance of a general attitude towards rule-breaking. And rule-breaking, in turn is associated with a desire for status. Indian attitude towards people of high social status is very similar to American attitude towards wealth.

Beyond a point, Americans will not tolerate soak-the-rich policies, because deep down, they believe that the rich deserve their wealth. More importantly, they empathize with the rich, and hope that they or their children can be rich one day.

Indians, likewise, believe that a state of status inequality is the right way to order society. This does not mean that they believe that the social hierarchy is rigid and unchanging for all time. In particular, this does not mean that Indians accept their place low down in the hierarchy any more than the fact that poor Americans accept wealth inequality as a given means that they accept their low income. Indians accept hierarchy as a given, and they want to improve their place in the hierarchy. Because it is only natural that rules do not apply to those high up in the hierarchy, the best way to assert your high status is to break the rules yourself. As everyone wants to move up the hierarchy in India, everyone breaks rules when he can, and uses rules to put down others when he can.

Every so often, Indians get into some sort of outrage over the treatment of one of their high-status people at foreign airports or some such. These high-status people have to pay lip service to the fact that we are ostensibly a democracy that has nominally adopted equality before the law, so they come up with explanations for why they deserve special treatment. The usual tack to take is to claim that they are not demanding special treatment, but that they are only feeling the pain of the common people: “If this is the treatment we get, imagine what a common person will go through” is the usual justification.

The other, closely related line of attack is to argue that not providing special treatment to the individual high-status person is actually an attack on the entire identity group the person represents. The surprising thing is not that the high-status person makes these arguments. The interesting thing is that Indians actually agree with their leaders who make these arguments, but only when the leader’s identity groups match their own. So when a Shahrukh Khan or an A P J Abdul Kalam gets frisked at a foreign airport, Indians’ identity as Indians takes over, and they treat the frisking as an insult to all Indians. Within India, when a Mayawati is given special treatment, Dalits stand behind her, while everyone else pretends to be outraged at the special treatment.

These arguments over special treatment do not represent a fundamental fight for equality. They just happen to be status competition by other means. Competition for status happens not only between individuals, but also between identity groups – caste, religion, language, nationality, etc. The excesses of our leaders, the instances of rule-breaking and self-aggrandisement, are actually public goods that they are providing to their followers. Indians do feel genuine pride when leaders they identify with indulge in the same status seeking rule breaking behaviours as their competing group’s leaders.

So, this is the first in my seven-post series on WWWIG – What’s Wrong With India’s Governance. What I have just described is the first and most basic reason for why India’s governance has been difficult to fix. In five subsequent posts, I will speak of five more reasons and in the last post, I will sum up. The next posts will be titled:

Obviously, many of these blanket statements I’ve made in this posts and will make in subsequent posts are generalizations. Generalizations do not have to be true in every single instance, but they have to be valid enough to support the point I am making. Not every Indian has the attitude I described, but enough do to have an impact on Governance.

Yes, much of what I am describing is changing, and hopefully much will have changed for the better in 10 years. What I am describing is the baseline from which to measure change. Also, how much of the change is real? How much of the current anti-corruption struggle represents a genuine cultural change and how much of it is simply power-struggle played out by the same fundamental rules? How do we know the difference?

Do not point to me instances where members of the American upper class act as if they are above the law, or instances where they actually get away with such behaviour. I am aware of them. They do not invalidate my argument. My argument is that American society as a whole is not comfortable with letting them get away with such behaviour. Likewise, do not point me to data that proves that American income and wealth mobility is not as much as the average American believes it to be. For purposes of cultural attitudes, what matters is the beliefs, not what actually happens.

]]>http://www.ravikiran.com/blog/examined/201210/wwwig-1-envious-and-righteous-anger/feed/5The Gatekeepers to Indiahttp://www.ravikiran.com/blog/examined/201207/the-gatekeepers-to-india-2/
http://www.ravikiran.com/blog/examined/201207/the-gatekeepers-to-india-2/#commentsFri, 20 Jul 2012 07:07:39 +0000http://www.ravikiran.com/blog/?p=3578It is said that our country is divided into an India and a Bharat. I hate this terminology because it is unnecessarily pejorative towards “Bharat”, but let’s go with it for now. These two nations are often identified with Urban and Rural India respectively, but sometimes the borders are not so clearly geographical. Some people say that the border is in fact between the rich and the poor. I believe that there are in fact two nations, but the line of separation is different from what is commonly assumed. On one side is India, a nation that exists in spite of government hindrance. On the other side is Bharat, a country that would not have existed in its current state without the overbearing presence of government.

Guarding the frontier between the two countries are the Gatekeepers. They are a loose coalition of politicians, government offiicials, NGOs and other activists, caste and community leaders, local strongmen, industrialists, and the like. The Gatekeepers may have access to the levers of government, the capability for violence, or both, to achieve their end. The Gatekeepers guard both countries against each other. To the Indians, they say that they are protecting them against the hordes from Bharat. To the Bharatiyas, they say that they are preventing the evil Indians from encroaching on their domain, and ensuring that the wealth created in India is equitably distributed.

All internal conflict in our country involves Bharat, India and the Gatekeepers. In fact, there are five types of such conflicts. In the first type, the Gatekeepers collect toll from the Bharatiyas who wish to cross over to India. One of the most popular ways to cross the border is via education, and naturally education is the controlled the most by the Gatekeepers. They extract a heavy toll from anyone who wishes to start schools or colleges, and generally keep the right to run educational institutions with themselves. Then they offer “reservations” in these institutions to the Bharatiyas to make it sound like they are leading an assault on the gates that they themselves built. The Right to Education Act is the latest example of this. It hinders those who wish to open private schools that will serve the Bharatiyas and forces schools that serve the Indians to reserve 25% of their seats for the Bharatiyas. That way, the Gatekeepers will collect ransom from both types of schools and votes from the Bharatiyas.

The second kind of conflict is where gatekeepers collect ransom from the Indians to leave them alone. There is no lack of examples of this type of conflict in the field of business and industry, but another less obvious example is moral policing. It is a poorly kept secret that most moral policing, attacks on pubs and on Valentine’s day cards is actually thinly veiled extortion.

The third kind involves Indians engaging the Gatekeepers as their agents to extort from the Bharatiyas. If an Indian wishes to buy agricultural land to build a factory, he cannot buy it from the Bharatiyas directly. He has to get it through the Gatekeepers, who expropriate it for him. Then other Gatekeepers lead agitations against this. Restrictions on the use of land, the fact that land ownership is a complete mess, and the agitations all serve to drive up the cost of land. The benefit of that does not go to those who possess the land, but to the Gatekeepers.

The fourth kind of conflict involves attempts by the Gatekeepers to annex parts of India into Bharat. This usually flows from the second and third kinds of conflict and is often hard to distinguish from them. Often, ransom demands by the Gatekeepers get transformed into attempts at complete control – this is made easier by misguided attempts by Indians to get the Gatekeepers to fight their battles for them. Instances of this conflict can be found in any of the partially regulated, partly free industries, such as Banking, Telecom or Aviation.

Internal conflict within Bharat over who gets to be Gatekeeper is the fifth and the oldest kind. Within Bharat, the gatekeepers are the arbiters of the Bharatiyas’ destiny. Much of politics involves this kind of conflict, where you fight elections on the premise of securing benefits for your own caste or class. Till liberalization, India was too small to loot from, and the only recourse for the gatekeepers was to extort from different sections within Bharat on behalf of their preferred section. This eventually proved unsustainable, so the other kinds of conflicts were developed. The conflict over job reservation is, in fact, an example of one that started off as this kind, i.e. as a conflict over government jobs, but which has now moved to the private sector, i.e. conflict no. 2 or 4.

All political, social and economic issues in India can be understood in terms of these conflicts – either singly or in combination. The commonly held view that divides India into two countries is not wrong, but oversimplified. It ignores the presence of the Gatekeepers. The common refrain that India should heed the cries of the Bharatiyas who are standing at the gates of India is misguided, because responding to it involves paying off the Gatekeepers and throwing crumbs at the Bharatiyas. The need of the hour is to drive away the Gatekeepers and to throw open the Gates.

]]>http://www.ravikiran.com/blog/examined/201207/the-gatekeepers-to-india-2/feed/4Tipping Pointhttp://www.ravikiran.com/blog/examined/201205/tipping-point/
http://www.ravikiran.com/blog/examined/201205/tipping-point/#commentsWed, 23 May 2012 06:32:27 +0000http://www.ravikiran.com/blog/?p=3571I am rather amused to hear opinions that argue that tipping to waiters is an act of generosity, and a barometer for how we treat those less fortunate than we are.

From a first order economic perspective, tipping shouldn’t matter. What you are willing to pay at the restaurant table depends on the economics of dining, and what the restaurateur pays his staff depends on the vagaries of the labour market.

An economist would point out that a tip comes out of your pocket as much as the rest of the bill does, and if you are in a society where a 15% or 20% tip is customary, you will factor that into your dining decisions. In other words, when deciding whether to eat out or not, or when deciding whether to eat at a particular place or not, you should mentally translate an expected bill of Rs1,000 to Rs1,200 ( assuming a 20% tip) and decide on that basis.

Likewise, when a waiter’s salary is negotiated, the tips that he can expect must surely be taken into account. How can it not be? A restaurateur will certainly tell a candidate for the post of waiter: “Look, your official salary is X, but you can expect tips of Y per month, so your take home is actually X+Y.”

So, at first glance, it must seem that the custom of tipping should make no difference. If there were to exist two cities that were identical in all respects except that Stingy City has a culture that tips 5% and Generous City has a culture that tips 20%, the menu prices and waiter salaries in the two cities must adjust themselves so that diners pay out approximately the same amount to the restaurant and the waiters take home around the same amount in both cities.

As I have taken care to mention, all this is the first order perspective. What about when we look more closely? This is where things get a little more interesting.

Suppose that you have a culture where tipping up to 20% is customary, but any tip in the range of 0 to 20 is acceptable, depending on how much you think you can afford, and how much you liked the service. What will happen then?

First, from the perspective of economics, this increases flexibility, which is a good thing. One of the biggest problems that economies face is that wages and prices are rigid. Actually, it is worse than that – wages are rigid downwards (i.e. it is difficult to reduce wages) while prices aren’t very rigid, but to the extent that they are, they are rigid upwards – i.e. it is difficult to raise prices. This makes it difficult for economies to get out of a downturn, because you can’t reduce people’s salaries when faced with reducing profits. So you hold on to employees, and when you can’t do that, you lay them off (or if labour laws make it difficult to do even that, you struggle for a bit and close down the company)

If you have a way to reduce people’s salaries (or, more precisely, link it to how your business is doing) then it is great for your business and for the larger economy (and for your workers). This is exactly what tipping achieves, especially if you have the culture that I just described, but actually even if you don’t, because what you earn as tips also depend on how many people show up at your restaurant, which also depends on how the economy is doing.

Also, tipping is a great way to do what business owners dream of doing – charging different people different prices based on their willingness and ability to pay. How do you charge 1,200 per dinner from the patron who is willing to pay that much without turning away the patron who is willing to pay only 1,000? Or if you set 1,000 as the price, how do you ensure that you extract the additional 200 rupees from the chap who is willing to pay higher as well? Tipping is a great way to do that, provided it is truly flexible.

Another second order effect that we must consider is the result of “anchoring” or “sticker shock”. The first order economist will assume that for the rational diner, there is no difference between seeing Rs1,200 and Rs1,000 on the menu card, if he does not have to tip 20% on the former but has to on the latter. We know that this is not true. The human mind may get anchored to the number 1,000 and reduce their estimate of the expense involved (and may be less unhappy about paying the additional Rs200 because no matter how strong the social norm is and how little choice he has in the matter, he perceives the tip as voluntary and an act of generosity that he feels good about.) In other words, a society where a generous tip is the norm may, ceteris paribus, end up paying more at the restaurant’s table. (But this, as we have seen, does not necessarily translate to better pay for the waiters) Actually, if you think of it, other than the voluntary and generosity part, the service charge that Indian restaurants have taken to charging must do as good a job of reducing sticker shock.

In a nutshell, tipping increases the variability and uncertainty in the waiter’s take home pay. It also puts power in the hands of the diner to reward or punish waiters day in and day out for “performance”. Given that the labour movement has always fought against uncertainty in pay and against being judged for performance, I find it funny that tipping is portrayed as an action that improves the situation of waiters. On the other hand, as I have explained, variable pay and variable pricing does make life better for restaurant owners and waiters, though not in the way you probably think.

But all this assumes that tipping is truly voluntary and variable. But the way the custom has evolved in the United States, it is a major social faux pas not to tip in the 15-20% range. Attitudes have evolved to a point of such rigidity that you are told that if you can’t tip that much, you shouldn’t be eating at that restaurant at all. Under the circumstances, it is not even a measure of how well you treat those lower down the social order. Given the social pressure in favour of tipping, how do you know if the tipper who tips 20% is a believer in egalitarianism or just someone clued into social norms? In such circumstances, the custom of tipping does no good to society other than serve as an instrument of snobbery and act as a trap for those unaware of social mores.

]]>http://www.ravikiran.com/blog/examined/201205/tipping-point/feed/4The Fourth Nickname of My Lifehttp://www.ravikiran.com/blog/personal/201204/the-fourth-nickname-of-my-life/
http://www.ravikiran.com/blog/personal/201204/the-fourth-nickname-of-my-life/#commentsThu, 19 Apr 2012 18:27:57 +0000http://www.ravikiran.com/blog/?p=3555It takes some people years to shake off detested childhood nicknames. My son managed to do it smoothly at the age of 3.

One look at my son’s face as an infant convinced me that he had a haughty demeanour. I therefore decided to nickname him Gatthu (Hindi:????? Kannada: ?????) which means “haughty” in Kannada. This name met with indignant protests from everyone in my family except my wife, but I persisted. “Doesn’t he look haughty? Just look at him!” I’d ask anyone who objected. No one could convincingly argue that my son does not look haughty.

So we called him “Gatthu” – at least, I did consistently. His mom used, in addition to “Gatthu”, a mishmash of endearing names many of which she’d make up on the spot, use once and never use again. We’d rarely call him Samvaadh, which is his given name.

Then my son joined playschool, where his teachers called him Samvaadh. Then, one of the two things must have happened:

My son realized that Samvaadh was the right name for him, and that “Gatthu” was the nickname he must shake off ASAP

My son realized that Samvaadh was his real name, and wondered who “Gatthu” was. After making a few logical leaps, he settled on the obvious answer.

So now, he is Samvaadh, my wife is Amma, and I am Gatthu.

]]>http://www.ravikiran.com/blog/personal/201204/the-fourth-nickname-of-my-life/feed/1Rules and Principleshttp://www.ravikiran.com/blog/examined/201204/rules-and-principles/
http://www.ravikiran.com/blog/examined/201204/rules-and-principles/#commentsMon, 09 Apr 2012 18:34:45 +0000http://www.ravikiran.com/blog/?p=3553Kunal and Gaurav are right. In this post, I was talking of the trade-off between rules and principles in policy enforcement. Actually, when you think of it, rules vs. principles is not a simple dichotomy, but a spectrum of choices.

Imagine that these choices are spread from left to right. At the left end of the spectrum is automation. Rules are enforced automatically, without anyone having the responsibility of enforcing them. The best example of automation in my stories was actually the turnstile – it automated the task of checking for tickets, leaving very little scope for discretion.

Another example is the jugad “automation” that the Hyderabad police enforced. Blocking off the right turn doesn’t seem like an example of automation, but for our purposes, it is, because it enforced the rules without the police having to intervene.

To the right of automation come rules – clear and transparent rules that leave no scope of discretion to the enforcers. But then, whether to follow the rule or not is still a choice – and ensuring that officials enforce the rule depends on the existence of procedural mechanisms.

As you move further to the right, you find that the rules have more and more discretion embedded in them. For example, consider the difference between enforcing a red light and ticketing someone for rash driving. The former is easier to enforce fairly than the latter.

At the extreme right of the spectrum is the idea of “principles-based regulation”. This distinction between rule-based regulation and principles-based regulation is used most often in the financial sector, so let me use an example from Banking to illustrate.

Banks in most countries have to abide by “KYC” norms – Know your customer. The idea is that they should make their best effort to know the real identity of their customers. The intent is to prevent money-laundering and financing crime. Regulators could enforce KYC in two ways - You could state the regulation in general terms – something like “Banks should establish and enforce polices to ensure that they know their customer’s identity at all times. These policies should enforce appropriate weight to the risk that customer represents”. Or the regulation could specify everything in great detail. It could specify which identity documents the banks may accept, which forms of address proof they should accept, and so on and so forth. The former is principles-based regulation while the latter is rule-based regulation.

Our first preference is to automate the enforcement of those rules, even when they lead to sub-optimal outcomes. Because we can’t rely on the police to enforce speed limits, we overdose on speed-breakers. Because we can’t enforce red lights at an intersection, we build flyovers where none are needed. As the example of the insurance company officials indicates, we’d like to automate hiring and promotion decisions as well, preferably through written exams.

Our financial sector regulation is heavily rules based, much to the annoyance of Percy Mistry and Aadisht Khanna. And not just our financial sector – our instinct is to demand detailed rules for everything. Indian mutual fund companies have been asked to enforce KYC compliance by collecting an identity proof and an address proof (list specified) and they have all got together and centralized this job . All well and good, except that I am happily KYC compliant even though the address on record is 2 years old and out of date – the AMCs have complied with the rules, but they have not bothered with the principle, which is to know your customer, not just collect documents.

Detailed rules cannot cover every situation and often create loopholes, but we still demand them. Why? Because we don’t trust our government’s competence or honesty, and with good reason. You can’t trust politicians with choosing the Chief of Army Staff or the Chief Justice of the Supreme Court, so institute a strict seniority system. You can’t trust bureaucrats to not take kickbacks while buying weapons, so load the purchase requisitions with extremely detailed specs and put in a rule requiring them to choose the lowest bid.

Paradoxically, however, while we don’t trust our government to do anything competently or honestly, it hasn’t stopped us from demanding that the government take on more and more responsibility. This means that our rules are not only extremely detailed, they are also contradictory. I think it was Madhu Menon who once told me that in Bangalore, the excise department required bars to have only one door (to stop you from running out during raids) while the fire department required you to have at least two. When you expect the government to do more and more, it is inevitable that the rules are a tangled mess. Naturally, you end up worsening the problem of corruption that you set out to solve.

As you move to the right of the spectrum, government’s discretionary powers increase. Citizens lose the certainty of clear and transparent rules, but if the principles are applied fairly and consistently, it is a net gain. That is because rather than have rules that guide your every step, you gain the freedom to plan and make decisions, as long as your decisions adhere to the overarching principles. But for this to happen, three things are necessary:

Better ability to detect wrongdoing by citizens after the fact. When traffic management moves from blocking off right turns and policemen directing traffic to traffic signals, you reduce the need for close supervision. But traffic signals work only if the police are capable of catching you if you jump a signal. In Mumbai, they do it by waiting for you past the traffic light and catching you. Because you don’t know whether the police are lying in wait or not, you will obey traffic lights in all circumstances (or at least during daytime) This reduces the amount of supervision that is required.

The system should have the ability to distinguish among a sensible decision by a government official that went wrong, an incompetent decision and outright wrongdoing. The first should be protected, the second should show up in your performance appraisal and the third should send you to jail.

Our courts and tribunals should have the capacity to interpret principles and hand out sensible decisions consistently and quickly.

Of course, our system currently lacks all three. We do not have an ability to detect wrongdoing. Our system does not have an ability to reward government servants for good performance or punish them for incompetence, and our courts do not hand out quick and clear decisions.

In addition to the above, we need to reduce the number of things government does. We also need to recognize that the government needs to have the right mixture of rules and discretionary power.

None of these can be done in isolation and if we try, it will make the problem worse. For example, the Jan Lok Pal idea does nothing to reduce the scope of government, and it does nothing about our investigating agencies or courts. Instead, it seeks to bypass the problem by treating every irregularity – i.e. a violation of a rule as a proxy for corruption. Given how corrupt our system is, this is probably accurate. But the problem is that if we do this, policy paralysis is inevitable.

This was when I was in Bay Area for a few months on a project. I was a frequent traveler by the BART. In the train stations of the BART system, they have turnstiles where you one has to swipe the ticket both during entry and exit. Presumably, the idea is that if you buy a ticket for a certain distance and overshoot that distance, the turnstile at the exit won’t let you out and you have to call for help from an official who will then proceed to ticket you – I never tested this, but it sounds plausible.

Once, at the exit turnstile, I found to my chagrin that I had lost my ticket and I was stuck. I looked around and realized that there was a broader gate that one could open without swiping a ticket – this was to be used by handicapped travelers on wheelchairs and people like me. Of course, there was a booth with a BART official directly overlooking this gate, and as soon as I opened the gate to pass by, he walked up to me and asked me what I was up to.

I told him, with as sheepish an expression as I could muster, that I had lost my ticket. The official took one look at me and said: “Oh you have lost your ticket? In that case, I will have to…”

I took a deep breath. Memories of my misadventures in Mumbai’s local trains came back to me. While I have never travelled ticketless, I’ve had experiences where I got confused and landed up at the wrong platform. Upon realizing my mistake, I would have to get to the overbridge to reach the correct one, and I would be stopped by the TC. On finding that the ticket or pass I had with me did not entitle me to that platform, he would tell me that he would have to fine me – and of course, that meant that I would have to offer a bribe. I didn’t expect to get away with a bribe here, but of course wouldn’t that mean that I would have to pay a hefty fine that was many times the ticket’s value?

“… charge you for the ticket.”

Wait, what? Not a fine? Just the price of the ticket? It was still a loss, but wasn’t a big deal anymore.

I nodded in assent, and he asked me where I had boarded the train from. I truthfully told him that it was the stop previous to that one.

“Oh just one stop? Foggetaboutit.” and he let me go. He had evidently decided that it wasn’t worth the effort collecting the small ticket fare for one stop.

I was grateful to be allowed out of the station without being poorer by the dollar and fifty cents it would have cost me otherwise. I also had that NRI reaction – you know the sinking feeling that an NRI experiences when he realizes that he would be treated worse in his own country than by the officialdom of a foreign one. On reflection, I found the whole thing strange. What if I had lied about the stop I had boarded the train from? Also, did the official commit an “irregularity” by not following the rules and collecting the ticket fare?

Story Two

I was visiting my uncle in Bangalore. My uncle was then working in a public sector insurance company, and he introduced me to some of his colleagues. We got into small talk about the nature of my work. This was around 13 years back, and “computerization” was still a new thing and not accepted as a matter of fact as it is now. So I ended up waxing eloquent about how awesome software was at automating routine tasks leaving you free to focus on the big decisions. While grunt work would be eliminated, computers would not take away the potential for knowledge work. All basic stuff, but remember that I was doing small talk, not giving a lecture, and that this was 13 years back.

At some point, I started realizing that we were speaking at cross-purposes. While I was trying my best to assure my uncle’s colleagues that computers would not make their decisions for them, it turned out that they, or at least the one person who was talking in a most animated way, wanted computers to automate decisions -his boss’s. Specifically, he wanted computers to somehow automate things in such a way that it left no scope for his boss to indulge in favouritism and politics during appraisals and promotions. And this was a fairly senior person in the organization.

The discussion never got anywhere after that.

Story Three

I work in Hi tech city, Hyderabad. On my commute to work, there is a T-junction, where a minor road connects to a major road. In the morning, vehicles have to turn right at the T to join the rush of vehicles that are getting to Hi tech city. The volume of traffic ought not to have caused a gridlock in any city except Hyderabad. In most western countries where traffic rules are enforced, the problem could have been solved by a simple stop sign. In Mumbai, they would have put in place a traffic light. But this is Hyderabad, where no one obeys traffic lights, let alone stop signs. When putting an actual traffic policeman to direct traffic did nothing to prevent an insane mess from developing every morning, the police hit upon a solution that is increasingly the norm in Hyderabad. They simply blocked off the T junction, forcing vehicles to take a left and a U to join the traffic.

These are three different stories, but all three have a common theme. The theme in question is about a particular trade-off in public policy. What is the theme?

]]>http://www.ravikiran.com/blog/examined/201204/three-stories-and-a-lesson/feed/11A Rant About Poverty Numbershttp://www.ravikiran.com/blog/examined/201203/a-rant-about-poverty-numbers/
http://www.ravikiran.com/blog/examined/201203/a-rant-about-poverty-numbers/#commentsThu, 22 Mar 2012 08:37:26 +0000http://www.ravikiran.com/blog/?p=3547The good Pragmatic Desi asked me to write about the release of the latest poverty numbers from NSSO. I do want to write a follow up post to my Pragati article. But the bad news is that I have accumulated a lot of heavy reading material in preparation for that follow up post which I need to read. The good news is that a long weekend is coming up, and I hope to get the reading and the post out by then.

But in the mean time, here is a rant.

Every so often, a poverty number comes out, and we go through essentially the same set of arguments . It is almost as if the dispute over poverty statistics in India is a battle over which headlines and sound bytes show up in the news rather than a serious discussion over which policies are best suited to reduce poverty.

The same errors are committed over and over again. For example, Dilip D’Souza tweeted: “Know anyone who lives in a city and earns Rs 860/mth? Understand this about them: they are not poor. “

As many people (including me, 4 months back) have pointed out, a person earning less than Rs860 a month would probably be classified as poor, if she has a family to support, because the family is being forced to get by on less than Rs860 per day per person in a city. The poverty definition is based on consumption per person, not on the income of the breadwinner. Dilip made the same error in 2006, and hasn’t had occasion to update his knowledge in 6 years. That, however, doesn’t stop him from accusing the Planning commission of bad faith in his tweets (1, 2, 3, 4, 5 )

(Dilip, if you are reading this, the explanation for the discrepancy in numbers is here. In short, they did what you want them to do – they updated their definition of poverty. The fact that you got confused explains why they shouldn’t do it very often.)

When we do point out the error, the angry rejoinder is that the poverty line is still too low – which family can get by comfortably at Rs6,000 a month? we are asked. This question too I have answered in my Pragati piece, but it is worth addressing in detail, which I will do here.

Let me use an analogy from the other end of the spectrum here – just as we disagree over what is poverty, we also disagree over what affluence is. If you are an Indian reading this post, I would estimate that an overwhelming majority of you are from the top 10% of the population, and I will bet that if you were asked to classify yourself, you would put yourself in the middle-class, reserving the epithet “rich” for people like Mukesh Ambani.

We can argue till kingdom come over whether you are rich or middle-class, or we can recognize that some things are objectively determined, while others are a matter of classification. The objective fact is that you travel to work by car while Ambani does by helicopter. Whether your commuting by car makes you rich is a matter of terminology and classification, which may differ from person to person. The criteria for classification shouldn’t be entirely arbitrary – what criteria you use should depend on what you want to measure.

But one thing is sure – if you use one set of criteria to classify people as poor or rich, you should take care to use the same criteria when you want to compare across time. If you use “commutes by helicopter” as your condition for being rich in 2004, but use “commutes by car or helicopter” in 2009, you will get a large increase in the number of rich people. But your data will be garbage.

Likewise, you can get a higher poverty headcount ratio by raising the poverty line. But what will you achieve by doing so? You will get a scarier headline, but what will you learn from it about the impact of our policies? To find out what impact government policies has had on poverty, we need to use the same criteria across time to see if poverty is reducing or increasing, and by how much.

So let’s say that we update our poverty line and find out that instead of dropping from 37% to 29%, our poverty rate has dropped from 50% to 45%. A drop of 5% instead of 8% as we originally thought.

What will the headlines say? “Drop in poverty less than originally assumed”. What is the real story? It will be “Growth has benefited the poorest the most”.

Now, for the record, I don’t believe we are going to see such numbers if we update our poverty line. I do agree that while growth has benefited the poor, the rich (and the less poor) have benefited more – so if you are a lower middle-class person struggling to send kids to school, you have probably gotten more out of growth than the destitute construction labourer. So the headline will probably be the other way round – and the headlines will be as misleading as ever. (“Poverty has fallen even more than believed!”)

But the point is to illustrate the silliness of what is going on. We have a system of measuring poverty. Yes it measures destitution rather than poverty, but in terms of methodology, it is one of the better functioning systems in the country (though it is annoying that they take 2 years to process and release data). And there is nothing wrong with focusing on destitution – wasn’t it Gandhiji’s dictum that we should keep the face of the poorest person in the country in mind whenever we decide policies? In what way will including the moderately poor in addition to the utterly destitute in the calculation improve our policy making?

Now, here’s the thing. I believe that the best way to achieve reduction in poverty is economic growth. I believe that growth does not leave the poorest behind. Given these beliefs, I don’t believe that raising the poverty line is such a big deal. After all, if growth happens, the rising tide will lift the boats of the moderately poor just as it will raise those of the destitute – so I would expect to see a reduction in poverty no matter where we draw the poverty line.

But suppose you disagree with me. Suppose you think that growth is not enough, and that there ought to be special focus on redistributing resources to the poorest. In that case, where would you want the poverty line to be? Shouldn’t you favour a poverty line that is drawn such that there is a sharp focus on the poorest and an accurate measurement of their number? Why would you want to dilute your metric by including the less poor in your measurement?

At this point, I might hear an objection (stated with a supercilious smile on your face) “OK. In that case, why not lower the poverty line all the way to zero? Problem solved. No poverty!”.

That objection would miss the point. The point is that any metric we use should give us useful information about the impact of our policies. Yes, our current poverty line is the destitution line. But it is important to note that nearly 3 out of 10 Indians continue to be below that line. In our list of national priorities, improving their lot should come near the top – which is why we should measure the number of our destitute to see how well we are doing in terms of achieving our priorities.

This doesn’t mean that this line is the one we should use for all time. If we used Indian criteria to classify Americans as poor, we would get a ridiculously low percentage. Should the Americans use our criteria? No – in the US, destitution has more to do with things like drug abuse, broken families, mental illness and cultural issues than with their economic growth – while the Americans should measure destitution and should figure out how to reduce it, they shouldn’t use it as the most important metric to measure the impact of their government’s policies. When we get richer, we should update our poverty line – we should do it transparently so that we can maintain comparability.

The point is that the metrics we use should help us focus on our most important priorities. In my view, the current poverty measurement does so. If you disagree, you need to explain why. But an explanation that amounts to: “This poverty line gives us a lower poverty percentage, and a less scary headline” is frivolous. That this argument has dominated our national debate tells us a lot about the quality of our national debate.

]]>http://www.ravikiran.com/blog/examined/201203/a-rant-about-poverty-numbers/feed/7A Tale of Love and Heartbreakhttp://www.ravikiran.com/blog/examined/201202/a-tale-of-love-and-heartbreak/
http://www.ravikiran.com/blog/examined/201202/a-tale-of-love-and-heartbreak/#commentsTue, 14 Feb 2012 05:47:54 +0000http://www.ravikiran.com/blog/?p=3542I don’t know how many remember the story of Syed Modi, who was murdered in 1988. He was a star badminton player who had fallen in love and married Amita (Ameeta?) Kulkarni, also a badminton player. He was shot dead in Lucknow while returning from practice.

Suspicion fell on his widow and on Dr Sanjay Singh, then sports minister of UP. The allegation was that they were having an affair. The case ended up with the CBI.

As it happens Sanjay Singh is a relative of the late VP Singh, who, at that time, was leading the fight against the Rajiv Gandhi government over corruption and misgovernance. Sanjay Singh is also the “Raja” of Amethi. It was the height of the Bofors scandal – a few newspapers, notably N Ram’s Hindu and Arun Shourie’s Indian Express were courageously exposing the bribery. I had just started reading newspapers, was following the various scandals with avid interest and virtually hero-worshipping Shourie.

Arun Shourie decided that the CBI investigation into the murder was intended to persecute Sanjay Singh, and mounted a full-scale defence of Amita Modi and Singh. Looking back, it is incredible how much of it I swallowed. I don’t remember the specifics, but a few things stand out. The CBI had found Amita Modi’s diary, where she had written about the conflict she felt in choosing between “S1″ and “S2″. It should have been obvious even to a stupid 14 year old what S1 and S2 were, but I bought the Indian Express version where it quoted Rani Jethmalani (Ram Jethmalani and his daughter were fighting on behalf of the defence) to say that the diary just reflected Amita’s disturbed mind and nothing else. The Indian Express also went to Amethi where they interviewed the people there. They were quoted as saying that while it was imaginable that their Raja would do a bit of womanizing, they couldn’t believe that he’d committed the murder. Garima Singh, the then wife of Sanjay, stood behind her husband.

Eventually, the case came to trial in 1990, by which time VP Singh was the prime minister. The CBI had weakened the case sufficiently that Amit and Sanjay were acquitted.

I forgot all about the case till I read a small news item tucked away somewhere, to the effect that Sanjay had married Amita. By then, VP Singh had gone from being the darling of the middle-class, the crusader against corruption, to its most hated symbol, with his Mandal agenda. Arun Shourie had gone from campaigning vehemently for VP Singh to fighting him. I don’t think he has ever mentioned the Syed Modi murder ever since VP Singh became Prime Minister. But the news of the wedding made me feel profoundly stupid. It’s difficult to believe now, but at that time, I had honestly thought that even their supposed affair was a story concocted by the CBI as part of its witch-hunt. (That is how the mind rationalizes. I suppose I could have believed that they did have an affair, but did not commit the murder. But then, how could it be a with-hunt to investigate the suspicion?)

So, quite clearly, Shourie had been perfectly willing to lead his newspaper on a campaign to subvert justice even as it was fighting the government on corruption. I am sure he did it with the highest of motives – I think he thought that getting the Rajiv Gandhi government out was then the highest national interest. But something didn’t seem right.

Of course, Sanjay Singh then had a fairly typical political career for a UP politician. He switched parties a few times. He was with the BJP for a few years before finally landing up with the Congress. Now, he and his wife are the feudatories of the current royal family.

The story faded to a dim memory for me, but I suppose the lesson has always stayed with me. It accounts for my cynicism over the Lok Pal and the concept of “Persons of unimpeachable integrity”. It accounts for my scepticism over the idea that the dynasty represents everything that is wrong with the country, or that if only the country rediscovered its Hindu soul, we would be great. It accounts for my discomfort with idolizing or demonizing (Narendra) Modi. In general, I am sceptical of any solution that relies on people’s character rather than structures and incentives.